FORBEARANCE AGREEMENT
WHEREAS, BNY Financial Corporation ("Factor") and
Signal Apparel Company, Inc. ("Signal") have heretofore entered
into a Factoring Agreement bearing an effective date of May 21,
1991 and various documents, notes, instruments, guaranties and
agreements executed and delivered in connection therewith (all of
the foregoing, as heretofore amended, amended and restated,
supplemented or otherwise modified, collectively, the "Existing
Signal Factoring Agreements"); and
WHEREAS, Factor and The Shirt Shed, Inc. ("Shed") have
heretofore entered into a Factoring Agreement bearing an
effective date of July 25, 1991 and various documents, notes,
instruments, guaranties and agreements executed and delivered in
connection therewith (all of the foregoing, as amended, amended
and restated, supplemented or otherwise modified, collectively,
the "Existing Shed Factoring Agreements"; together with the
Existing Signal Factoring Agreements, collectively, the "Existing
Factoring Agreements"); and
WHEREAS, Signal and Shed (collectively, the "Clients")
acknowledge, confirm and agree that (a) defaults have occurred
under the Existing Factoring Agreements, which defaults continue
to exist and which the Factor has suffered to exist, including
without limitation, paragraphs 11(a)(iii) [TANGIBLE NET WORTH],
11(a)(iv) [WORKING CAPITAL] and 11(a)(v) [PRE-TAX OPERATING
EARNINGS], (collectively, the "Existing Defaults"); and (b) as a
result of the Existing Defaults, the Factor is entitled, as of
the date hereof, to terminate the Existing Factoring Agreements
and to exercise any and all of its rights and remedies under the
Existing Factoring Agreements, applicable law or otherwise to
realize upon its collateral and to collect the Obligations (as
such term is defined in the Existing Factoring Agreements); and
WHEREAS, in order for the Clients to continue to
operate their businesses and to make efforts to meet their
respective financial obligations to the Factor and other
creditors, the Clients have requested that the Factor forbear for
a limited period of time from exercising its rights and remedies
under the Existing Factoring Agreements; and
WHEREAS, the Factor has advised the Clients that Factor
desires to preserve the Existing Defaults and the rights and
remedies arising under the Existing Factoring Agreements as a
result of the existence and continuance of the Existing Defaults;
and
WHEREAS, subject to the terms and conditions set forth
herein, Factor has agreed to accommodate the Clients' request to
forbear from exercising its rights and remedies under the
Existing Factoring Agreements.
NOW THEREFORE, in consideration of the foregoing, and
for good and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. ACKNOWLEDGMENT OF OUTSTANDING OBLIGATIONS. Each
of the Clients hereby acknowledges, confirms and agrees that as
of October 31, 1997, the Obligations due and owing to the Factor,
jointly and severally by the Clients, are in the aggregate
principal amount of not less than $____________, plus accrued and
unpaid interest, plus all costs, fees, expenses and other sums
and charges due and owing to the Factor under the Existing
Factoring Agreements, including, without limitation, all costs
and expenses incurred by the Factor in connection with the
negotiation, preparation and execution of this Forbearance
Agreement, and all documents, instruments and agreements
delivered in connection with this Forbearance Agreement (all of
the foregoing is collectively referred to as the "Existing
Debt"). Each of the Clients hereby acknowledges, confirms and
agrees that as of the date hereof, the Existing Debt is due and
owing by the Clients to the Factor without offset, defense or
counterclaim of any kind, nature or description whatsoever.
2. BINDING EFFECT OF EXISTING FACTORING AGREEMENTS.
Each of the Clients hereby acknowledges, confirms and agrees
that: (a) each of the Existing Factoring Agreements to which such
Client is a party has been duly executed and delivered to the
Factor, and each is in full force and effect as of the date
hereof; (b) the covenants, agreements and Obligations of each
Client contained in or incurred under the respective Existing
Factoring Agreements to which such Client is a party constitute
the legal, valid and binding Obligations of such Client,
enforceable against such Client in accordance with the terms and
conditions of the Existing Factoring Agreements to which such
Client is a party, and each such Client has no valid defense to
the enforcement of such Obligations or such Existing Factoring
Agreements to which it is a party; and (c) the Factor is and
shall be entitled to the rights, remedies and benefits provided
for in the Existing Factoring Agreements and pursuant to
applicable law, subject to the terms and conditions of this
Forbearance Agreement.
3. ACKNOWLEDGEMENT OF LIENS AND SECURITY INTERESTS BY
CLIENTS. Each of the Clients hereby ratifies and confirms its
grant to the Factor of the liens upon and security interests in
the properties and assets of the Clients heretofore mortgaged,
pledged, granted or assigned to the Factor under the Existing
Factoring Agreements and the New Factoring Agreements (as defined
herein), and acknowledges and confirms that such liens and
security interests secure and shall continue to secure the
Obligations.
4. PRESERVATION OF EXISTING DEFAULTS. Each of the
Clients hereby acknowledges, confirms and agrees that
notwithstanding the execution and delivery of the New Factoring
Agreements, (a) the Existing Defaults are preserved and shall
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continue to exist after the execution and delivery of the New
Factoring Agreements; and (b) subject to the conditions set forth
in this Forbearance Agreement, the Factor's rights and remedies
arising by reason of the Existing Defaults are preserved in all
respects without prejudice to the Factor.
5. FORBEARANCE.
(a) Factor and each of the Clients agree that,
until the occurrence of an Additional Default (as defined in
paragraph 7 below), the Factor will forbear from exercising any
of its rights and/or remedies arising by reason of the Existing
Defaults or applicable law to realize upon its collateral, or any
part thereof, and/or to commence any action against the Clients,
individually or collectively, to collect the Obligations or any
part thereof. The period commencing as of the date hereof and
terminating on the date of the occurrence of an Additional
Default is hereinafter referred to as the "Forbearance Period".
(b) Upon the termination of the Forbearance
Period, the agreement of the Factor to forbear shall
automatically and without further action or notice terminate and
be of no further force or effect, it being expressly agreed that
the effect of such termination of the Forbearance Period will be
to permit the Factor, without notice, demand or advertisement
(all of which are expressly waived by the Clients), to exercise
its rights and remedies arising by reason of the Existing
Defaults or applicable law with respect to the collateral and the
Obligations, all without further notice, passage of time or
forbearance of any kind or nature.
6. EXECUTION AND DELIVERY OF NEW FACTORING
AGREEMENTS.
(a) As an inducement to the Factor to enter into
this Forbearance Agreement, the Clients have agreed to,
simultaneously with the execution and delivery of this
Forbearance Agreement, execute and deliver (or causing to be
executed and delivered) and comply with the terms and provisions
of the following:
(i) Amended and Restated
Factoring Agreement between Factor and
Signal;
(ii) Amended and
Restated Factoring Agreement
between Factor and Shed;
(iii)
Termination of Right to Request
Advances and Incur Obligations
Under Factoring Agreement between
Factor and American Marketing
Works, Inc. ("AMW");
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(iv) Amendment to
Inventory Security Agreement
between Factor and Signal;
(v) Amendment to Inventory
Security Agreement between Factor and
Shed;
(vi) Amendment to
Inventory Security Agreement
between Factor and AMW;
(vii) Amendment
to Equipment Security Agreement
between Factor and Signal;
(viii) Amendment
to Equipment Security Agreement
between Factor and Shed;
(ix) Amendment to
Equipment Security Agreement
between Factor and AMW;
(x) Secretary's Certificate
of Directors' Resolutions for Signal;
(xi) Secretary's
Certificate of Directors'
Resolutions for Shed;
(xii)
Secretary's Certificate of
Directors' Resolutions for AMW;
(xiii) Letter re:
Cash Deposits between Factor and WG
Trading Company Limited
Partnership; and
(xiv) Amended
and Restated Intercreditor and
Subordination Agreement among WG
Trading Company Limited
Partnership, WG Partner, L.P.,
Walsh Greenwood & Co., and Factor;
and
the various documents, notes, instruments, guaranties and
agreements executed and delivered in connection with the
foregoing (all of the foregoing, as amended, amended and
restated, supplemented or otherwise modified, collectively, the
"New Factoring Agreements").
7. ADDITIONAL DEFAULTS; REMEDIES.
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(a) The occurrence of any one or more of the
following shall constitute an "Additional Default" under this
Forbearance Agreement and a default under the New Factoring
Agreements:
(i) the breach of any representations,
warranties, covenants or agreements contained in this Forbearance
Agreement, which breach shall be material, as determined in
Factor's sole discretion;
(ii) the occurrence of a default under
the New Factoring Agreements;
(iii) any payment made by either or both
of the Clients to any entity which is a party to a subordination
agreement as of the date hereof in favor of the Factor regarding
obligations of either or both of the Clients to such entity and
Factor; or
(iv) initiation of any action against either
or both of the Clients to collect monies allegedly owed by any
entity which is a party to a subordination agreement as of the
date hereof in favor of the Factor regarding obligations of
either or both of the Clients to such entity and Factor.
(b) Upon the occurrence of any Additional Default
hereunder, and notwithstanding anything to the contrary contained
in the New Factoring Agreements, the Factor may thereupon, and at
any time and from time to time thereafter, demand immediate
payment of the Obligations, in full or in part, exercise any and
all of its rights and remedies under this Forbearance Agreement,
the New Factoring Agreements, applicable law or otherwise, all of
which rights and remedies shall be non-exclusive and cumulative
and exercisable in whatever order or manner as the Factor, in its
sole discretion, may deem appropriate.
8. GENERAL PROVISIONS.
(a) Upon the request of the Factor, the Clients
shall execute and deliver to Factor, or cause to be executed and
delivered, all such additional documents, instruments and
agreements as the Factor may determine, in its sole discretion,
are necessary or desirable to effectuate the purposes and intent
of this Forbearance Agreement.
(b) This Forbearance Agreement shall be binding
upon each of the Clients and their respective successors and
assigns.
(c) The validity of this Forbearance Agreement,
its construction, interpretation and enforcement, shall be
determined under and according
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to the laws of the State of New York, without any reference to
its principles of conflicts of law. The Clients hereby consent
to the non-exclusive jurisdiction of the Supreme Court of the
State of New York for the County of New York and the United
States District Court for the Southern District of New York in
any action or proceeding under, arising out of or related to this
Forbearance Agreement, the Existing Factoring Agreements and the
New Factoring Agreements.
(d) THE CLIENTS AND THE FACTOR HEREBY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER, ARISING
OUT OF OR RELATED TO THIS FORBEARANCE AGREEMENT.
(e) The unenforceability or invalidity of any one
or more provisions hereof shall not render any other provisions
herein contained unenforceable or invalid.
(f) This Forbearance Agreement is the result of a
full and complete negotiation at arm's length by all parties
hereto. No term sheets or prior drafts or memoranda prepared by
any parties shall be used to construe or interpret any provision
hereof, nor shall any one party hereto be considered the
"drafter" of this Forbearance Agreement for the purposes of
construing the terms, conditions and obligations set forth
herein. This Forbearance Agreement sets forth the entire
understanding of the parties with respect to the matters set
forth herein and supersedes in their entirety any and all
understandings and agreements, whether written or oral, of the
parties with respect to the foregoing. Except as expressly
amended or otherwise modified hereby (including, without
limitation, the preservation of the Existing Defaults), the New
Factoring Agreements remain in full force and effect in
accordance with their existing terms and provisions as of the
date hereof, EXCEPT THAT, in the event of any conflict between
any term or provision of this Forbearance Agreement and any term
or provision of the New Factoring Agreements, the term or
provision of this Forbearance Agreement shall control. This
Forbearance Agreement cannot be changed, modified, amended,
waived or terminated in any respect, except by a writing executed
by the party to be charged.
(g) This Forbearance Agreement may be executed in
one or more counterparts, each of which shall constitute but one
and the same Forbearance Agreement.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Forbearance Agreement as of the 31st day of
October, 1997.
BNY FINANCIAL CORPORATION
By:/s/ Frank Imperati
Title: Vice President
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SIGNAL APPAREL COMPANY, INC.
By: /s/ David E. Houseman
Title: Chief Executive Officer
THE SHIRT SHED, INC.
By: /s/ Robert Powell
Title: Vice President